TY - JOUR
AU - Trefler,Daniel
AU - Zhu,Susan Chun
TI - The Structure of Factor Content Predictions
JF - National Bureau of Economic Research Working Paper Series
VL - No. 11221
PY - 2005
Y2 - March 2005
DO - 10.3386/w11221
UR - http://www.nber.org/papers/w11221
L1 - http://www.nber.org/papers/w11221.pdf
N1 - Author contact info:
Daniel Trefler
Rotman School of Management
University of Toronto
105 St. George Street
Toronto, ON M5S 3E6
CANADA
Tel: 416/946-7945
Fax: 416/978-5433
E-Mail: dtrefler@rotman.utoronto.ca
Susan Chun Zhu
Department of Economics
Michigan State University
Marshall-Adams Hall
East Lansing, MI 48823
E-Mail: zhuc@msu.edu
AB - The last decade witnessed an explosion of research into the impact of international technology differences on the factor content of trade. Yet the literature has failed to confront two pivotal issues. First, with international technology differences and traded intermediate inputs there does not exist a Vanek-consistent definition of the factor content of trade. Restated, we do not know what we are trying to explain! We fill this gap by providing the correct definition. Second, as Helpman and Krugman (1985) showed, many models beyond Heckscher-Ohlin imply the Vanek prediction. So what model is being tested? We completely characterize the class of models being tested by providing a familiar `consumption similarity' condition that is necessary and sufficient for the Vanek prediction. We illustrate with a unique dataset containing input-output tables for 41 rich and poor countries. We find modest support for the strong version of the Vanek prediction and impressive support for weaker versions of the prediction.
ER -